The electric vehicle (EV) industry is encountering speed bumps, causing doubt to incumbent automakers. However, for early-stage EV companies like Rivian (NASDAQ:RIVN), it’s been a very rocky year thus far, with RIVN stock plunging more than 30% year-to-date alone, as investors digest various headwinds in this space. This is central to my RIVN stock analysis.
Despite the company’s electric vans, Rivian’s consumer segment faces challenges. Tesla’s (NASDAQ:TSLA) price cuts on its Model Y SUVs, and analyst downgrades, have added increased pressure on Rivian’s management team to execute, and do so quickly.
With that said, let’s dive into the bull and bear case behind Rivian, and whether RIVN stock is worth buying right now.
The Bull Case
Rivian, a front-runner in the world of electric vehicle stocks, exceeded expectations in 2023 by producing 57,232 vehicles. The market guidance was set at 54,000. This year, the company could outperform, with Rivian expected to open the curtains on the R2, a smaller, cheaper vehicle, on March 7. The price tag for this model is expected to be around $40,000 with potential tax credits.
Despite recent downgrades, Wall Street remains positive on RIVN stock, issuing a consensus buy rating and a price target of $25.05, signaling an upside of more than 50% in this stock. This is central to this RIVN stock analysis.
Additionally, Rivian has been shaking up its C-suite. Jennifer Prenner, a former Amazon and Meta marketing executive, has been dubbed as Vice President of Marketing and CMO at Rivian. With experience for Meta’s Reality Labs, Amazon’s Fire TV divisions, and Verizon, Prenner was bouncing off the walls for Rivian’s mission and its team on LinkedIn.
The Bear Case
The wind has left Rivian’s proverbial wings due to January’s inflation exceeding expectations. This poses challenges to the automotive industry, as higher interest rates may result in delayed purchases and slower EV demand. As noted by Analyst Dan Levy, the EV sector is currently heavily pressured because of slowing U.S. sales growth.
Despite recent production growth, Rivian could be set to run over various financial speed bumps due to high costs and profitability, raising sustainability concerns.
Despite having enough cash to operate for some time, Rivian has invested billions in growth last year and requires fresh funds for 2024. Profitability may take years, making dilution or debt issuance likely at some point in the near future. Investors may consider entry at reduced stock prices as further news will come on its Q4 results on February 21.
Is RIVN Stock a Buy?
Rivian is grappling with a cash-loss dilemma due to fierce competitors out of China and the U.S. Despite holding $8 billion in cash, Rivian’s stock price is on the downtrend and its negative operating cash flow persists. This has led to a broadly bearish market position on the EV maker.
That said, I’ve always thought most of the profits are made in any cycle during times like these. The company is certainly among the EV names facing scalability and cash flow challenges. However, once scale is reached, I do think Rivian has the brand power and management team to make it to the other side.
Accordingly, this is a stock I think is a cautious buy right now. If Rivian is able to survive until 2026, I think the company has the potential to take away significant market share from Tesla (that cybertruck is just an absolute joke). Rivian’s product is impressive, its vehicles are everywhere (at least where I am), and its brand value remains strong. In the world of early-stage EV startups, these factors matter a great deal to the overall thesis. This concludes my RIVN stock analysis.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
